A Report

On

J.P Morgan & Chase Company

Submitted By

Sumit Kumar Shah

(Innovate)

A Report Submitted to

Apex SMART Team

Apex College

Mid-Baneshwor, Kathmandu

November, 2012

Acknowledgement

We wish to express their strong appreciation to the many who offered ideas, comments,

and critical questions during the early stage of completion of the report. Within the

college premises, special thanks to our SMART mentors Mr. Milan Kumar Moktan and

Ms. Anju Koirala, faculties of Apex College as well as our library representatives.

Further, we would like to thank everybody whose valuable guidelines have contributed a

lot for the successful completion of this report.

Executive Summary

This Report addresses three basic questions. First, it addresses the evolution,

development and major area of operation of JPMorgan Chase & Co. The first chapter

gives light to the major products and services offered by JPMorgan Chase & Co. Second,

the Report addresses how the firm is committed towards the management of its key

financial strength and weakness and the potential opportunities and threats.

The report also addresses the assessment of internal as well as external environment. The

strategies and efforts of the firm in management of such volatile environment will be

elaborated in this very report.

Finally, the Report addresses where the Firm is now by summarizing the comprehensive

strategies to ensure the continuous growth, business expansion as well as sustaining in the

market.

Table of Contents

Acknowledgement

Executive Summary

Chapter I Introduction 1-2

1.1 Background of the Study 1

1.2 Objectives of the Study 1

1.3 Limitations 2

1.4 Methodology 2

Section I Profile of JPMorgan Chase & Co. 5-12

1.1 Introduction of the Company 5

1.2 History of JPMorgan Chase & Co. 6

1.3 Company Structure 7

1.4 Products and Services 8

1.5 Recent News and Events 12

Section II Analysis of Environment 13-17

2.1 Assessment of Internal Environment 13

2.2 Assessment of External Environment 14

2.3 JPMorgan Chase & Co. SWOT Analysis 14

Section III Summary and Conclusion 18-19

3.1 Summary 18

3.2 Suggested Strategies 18

References

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Chapter I

Introduction

1.1 Background of Study

The report entitled “Comprehensive Study of JPMorgan Chase & Co.” is our final

SMART Project Work assigned to us. The report is prepared to enhance the

understanding of the students of banking field as well as undertaken to broaden the

knowledge about the international practices in the banking sector, business operating

strategies, environmental assessment of the business activities.

The report also provides the key financial highlights on the banking industries of

America with reference of JPMorgan Chase & Co. Our group has taken JPMorgan

Chase & Co. as the subject matter of study to explore the ideas and information as much

as possible. We have aimed to provide a detail touch on the key business operations

and market situation through this report with the following objectives mentioned in

below topic.

1.2 Objective of the Study

The principal objective of the present study are mentioned below:

• to carry out a detailed analytical study &find out the current position of JP Morgan

Chase & Co.;

• to findout the major fators behind the growth and expansion of its business over

the centuries;

• to formulatethe structue, environment analysis and market prctice of the

company; and

• to enhance the idea and strategy of present JP Morgan Chase among the

management students.

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1.3 Limitations of the Study

The major limitations of the report are mentioned below:

• The report is lacking the key financial datas in the form of tables, graphs etc.

which could be helpful in better understanding of its financial position;

• The report doesnot consisted with all relevant informations of JPMorgan chase &

Co. due to its worldwide business operation;

• The report does not include any kind of primarty data.

1.4 Methodology

Research methodology is concerned with various methods and techniques which are

the process of the studies. It includes wide range of the methods, including quantitative

for data analysis and presentation.

1.4.1 Report Design

The objective of the study is to make an analytical study of JPMorgan Chase & Co.

This research would proceed with descriptive, exploratory and analytical methods in

combined form.

1.4.2 Data Collection Procedure

Information and data are collected through different ways. Office records, published

data, statements and balance sheet would be taken as the major source of secondary

data. Since the report is of international company beyond our reach to study, all the date

here included in the very report is of secondary data.

1.4.3 Methods for Analysis and Presentation of Data

The main purpose of analyzing the data is to change it from and unprocessed from to

an understandable presentation. The analysis of data will consist of organizing,

tabulation, pie-chart presentation etc. in case required.

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Section I

Profile of JPMorgan Chase & Co.

1.1 Introduction of the Company

JPMorgan Chase & Co. (NYSE: JPM) is an American multinational banking

corporation of securities, investments and retail. It is the largest bank in the United

States by assets, and as of 2012, it ranks as the second largest bank in the world by

assets. It is a major provider of financial services, with assets of $2.509 trillion.

The hedge fund unit of JPMorgan Chase is one of the largest hedge funds in the United

States. It was formed in 2000, when Chase Manhattan Corporation merged with J.P

Morgan & Co.

JPMorgan Chase is one of the Big Four banks of the United States with Bank of

America, Citigroup and Wells Fargo. According to Bloomberg, as of October 2011

JPMorgan Chase surpassed Bank of America as the largest U.S. bank by assets.

Through its predecessor, the Bank of the Manhattan Company, it is the 22ndoldest bank

in the world. Similarly, according to Forbs magazine, JPMorgan Chase & Co. is the

world's second largest public company based on a composite ranking and at 16th

position of fortune 500 list from previous rank 13. The Bank of America Corporation

stands at first and Citigroup at second place based on the composite ranking.

Through a continuous operation in the market for over 160 year, J.P. Morgan has been

upgrading and strengthening its hold in the U.S market. Currently the firm is operating

its business in 6 major area of expertise which includes:

1] Asset Management 2] Commercial Banking

3] Investment Bank 4] Private Bank

5] Securities Services 6] Treasury Services

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1.2 History of JPMorgan Chase & Co.

The heritage of the House of Morgan traces its roots to the partnership of Drexel,

Morgan & Co., which in 1895 was renamed J.P. Morgan & Co. (see also: J. Pierpont

Morgan). Arguably the most influential financial institution of its era, J.P. Morgan &

Co. financed the formation of the United States Steel Corporation, which took over the

business of Andrew Carnegie and others and was the world's first billion-dollar

corporation. In 1895, J.P. Morgan & Co. supplied the United States government with

$62 million in gold to float a bond issue and restore the treasury surplus of $100 million.

Built in 1914, 23 Wall Street was known as the "House of Morgan", and for decades

the bank's headquarters was the most important address in American finance. At noon,

on September 16, 1920, a terrorist bomb exploded in front of the bank, injuring 400 and

killing 38.

In the 1930s, all of J.P. Morgan & Co. along with all integrated banking businesses in

the United States, was required by the provisions of the Glass–Steagall Act to separate

its investment banking from its commercial banking operations. J.P. Morgan & Co.

chose to operate as a commercial bank, because at the time commercial lending was

perceived as more profitable and prestigious. Additionally, many within J.P. Morgan

believed that a change in political climate would eventually allow the company to

resume its securities businesses but it would be nearly impossible to reconstitute the

bank if it were disassembled.

In 1935, after being barred from securities business for over a year, the heads of J.P.

Morgan spun off its investment-banking operations. Led by J.P. Morgan

partners, Henry S. Morgan (son of Jack Morgan and grandson of J. Pierpont Morgan)

and Harold Stanley, Morgan Stanley was founded on September 16, 1935 with

$6.6 million of nonvoting preferred stock from J.P. Morgan partners. In order to bolster

its position, in 1959, J.P. Morgan merged with the Guaranty Trust Company of New

York to form the Morgan Guaranty Trust Company.

The bank would continue to operate as Morgan Guaranty Trust until the 1980s, before

beginning to migrate back toward the use of the J.P. Morgan brand. In 1984, the group

finally purchased the Purdue National Corporation of Lafayette Indiana, uniting a

history between the two figures of Salmon Portland Chase and John Purdue. In 1988,

the company once again began operating exclusively as J.P. Morgan & Co.

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1.3 Company Structure

The Bank began operations in Japan in 1924, in Australia during the later part of the

nineteenth century, and in Indonesia during the early 1920s. An office of the Equitable

Eastern Banking Corporation opened a branch in China in 1921 and Chase National

Bank was established there in 1923. The bank has operated in Saudi Arabia and

India since the 1930s. Chase Manhattan Bank opened an office in Korea in 1967. The

firm's presence in Greece dates to 1968. An office of JPMorgan was opened in Taiwan

in 1970, in Russia (Soviet Union) in 1973, and Nordic operations began during the same

year. Operations in Poland began in 1995.

JPMorgan Chase, in its current structure, is the result of the combination of several

large U.S. banking companies over the last decade. Some of the major host banking

companies includes the followings:

* Chase Manhattan Bank * Washington Mutual.

* J.P. Morgan & Co. * Bear Stearns and

* Bank One

Going back further, its predecessors include major banking firms among which are;

* Chemical Bank * Texas Commerce Bank

* Manufacturers Hanover * Great Western Bank.

* First Chicago Bank * Providian Financial and

* National Bank of Detroit

JPMorgan Chase & Co. owns five bank subsidiaries in the United States:

* JPMorgan Chase Bank * J.P. Morgan Bank and Trust Company

* National Association * Dearborn

* Chase Bank USA * JPMorgan Chase Bank

* National Association * Custodial Trust Company

JPMorgan Chase's activities are organized, for management reporting purposes, into six

business segments:

* Investment banking * Asset management

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* Card services and consumer lending * Home lending

* Commercial banking * Treasury & securities services

* Personal and business banking * Corporate - including private equity

(One Equity Partners) and treasury

and corporate functions

The above all division at JPMorgan is divided by teams of different authorities and

responsibilities. Apart from other, the investment banking division is divided by teams:

industry, M&A and capital markets. Industry teams include consumer and retail,

healthcare, diversified industries and transportation, natural resources, financial

institutions, metals and mining, real estate and technology, media and

telecommunication.

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1.4 Product and Services

JPMorgan Chase & co. is a leading global financial services firm with operations in

more than 60 countries. The firm is a leader in investment banking, financial services

for consumers, small-business and commercial banking, financial transaction

processing, asset management and private equity. JPMorgan Chase & Co. serves

millions of consumers in the United States and many of the world’s most prominent

corporate, institutional and governmental clients under its J.P Morgan and Chase

brands.

Being the world leading as well as one of the biggest financial institutions, it has been

serving its customers with number of services and products. It is almost not possible to

mention all of the products and services the company is currently offering to the

individuals, private corporations and government. In order to make it easy for us to

understand the nature and complexity of those products and services, the numbers of

products are categorized in a broad terminology.

The major distinct products and services with which JPMorgan is currently serving its

customers are broadly mentioned below:

1.4.1 Investment Banking

Within investment banking, the firm works with a broad range of issuer clients,

including corporations, institutions and governments, and provides comprehensive

strategic advice, capital raising and risk management expertise. The investment banking

area of operation of JPMorgan deals further with:

� Mergers and Acquisitions (M&A)

JPMorgan has secured the top spot M&A advisory firm. The firm’s in-depth

expertise extends to a wide range of strategic M&A transactions, including asset

purchase and dispositions, restructurings and reorganizations.

� Corporate Restructuring

� Industry Coverage

Within investment banking, the firm works with broad range of clients including

corporations, institutions, government and provides comprehensive strategic

advice, capital raising and risk management solutions. The industry coverage

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service includes almost all type of business organizations around the world and

provides effective investment decisions to them.

� Corporate Financial Advisory

J.P. Morgan Corporate Finance Advisory team provides thought leadership on

corporate finance issues and develops structured products for the investment

banking clients. The area of expertise includes:

* Corporate Finance * Rating Advisory

* Strategies for Banks * Strategies for Insurance Companies

1.4.2 Equities Management and Services

J.P. Morgan is a global leader in providing a wide range of innovative equities solutions

to investor and to issuer clients. Currently the firm involved in cash equities and equity

derivatives. The firm has a great potential in public offerings and hedge fund through

its equity management department.

1.4.3 Foreign Exchange

As a top tier liquidity provider, JPMorgan offers comprehensive solutions enabling

clients to uncover their potential in today’s FX market. The firm offer competitive

pricing across 300 currency pairs in cash and derivative products. This service enhances

the efficient execution of sales and trading of its clients in today’s competitive market.

1.4.4 Commodities

Under the commodities product, Morgan provides global commodities platform

complete with market-making, managing market and credit risk and physical and

financial solutions across the full spectrum of commodities.

From metals and energy to environmental and agricultural commodities, JPMorgan

develops as well as provides complete solutions for its commodities clients.

1.4.5 Risk Management

With an extensive experience of over 100 years in creating risk management solutions,

J.P. Morgan is able to meet the needs of both issuer and investor clients. The risk

management expertise of JPMorgan demonstrated its innovative capabilities in:

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* Derivatives * Longevity Risk Management

* Prime Brokerage * Credit Liquidity management and more...

1.4.6 Prime Services

Like every investment banks, the prime services of J.P Morgan include:

� Broker Dealer Service

J.P Morgan as an industry leader provides clearing, custody, operations, technology

and order execution capabilities to broker dealers worldwide.

� Futures & Options

J.P. Morgan is one of the most dynamic market leaders in the futures and options

brokerage business. At present, it is clearing more than 70 exchanges with

electronic trading access to over 5o of the exchanges. The future and option product

deals in research, sales execution, clearing service, foreign exchange and

commodity asset classes etc.

1.4.7 Other Products and Services

The other major products offered by the firm include the followings:

� Emerging Market Opportunities & Trading

J.P. Morgan serves Emerging Markets clients across origination, derivatives,

trading, foreign exchange and research, while local presence in each market ensures

client accessibility.

� Structured Investment Products

Structured products also known as structured investments are systematized classes

of assets enhanced to provide increased diversification for clients’ portfolios,

enhanced returns.

� Global Corporate Bank

The Global Corporate Bank manages the firm’s overall relationships with large

corporations, financial institutions, public sectors. This service of J.P. Morgan deals

with objectives and challenges in financing, risk management, working capital

management, cash management and investments.

All the minor products and services such as commercial cards, foreign exchange,

private banking, trade services etc. are provided under this very department.

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1.5 Recent News and Events

It is not to mention that with such a huge portfolio JPMorgan is achieving every bit of

success on its way. The firm has a world class renowned standard as well as goodwill.

It has always been the highlight of the American economy because of its major

contribution in the economic welfare.

Recent news of Boston Marathon which has devastated by bomb attack was actually

organized by this very firm under the name J.P. Morgan Corporate Challenge.

Similarly, the bank is also ranked #1 in Mobile Banking as on 25th April 2013.. It has

also received a sum of $70 million in new market tax cred award from U.S Department

of Treasury’s Community Development Financial institution Fund to help increase

economic opportunities in the nation’s most distressed areas.

The bank has on April 22, 2013, unveiled new incentives to reinforce positive spending

habits towards the customers. The Chase Blue Print is the idea behind this task.

Section II

Environment Analysis

As one of the world's leading financial institutions, JPMorgan Chase recognizes that

economic growth and rising living standards fundamentally rely on the abundance and

vitality of the planet's resources and ecosystems. Supporting a more environmentally

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sustainable global economy is a challenge with real implications for every sector of

modern society, including financial services.

2.1 Assessment of Internal Environment

In the wake of the Synthetic Credit Portfolio’s losses, in May 2012 the Firm – under

the guidance of its Chief Risk Officer – mandated a self-assessment of the Risk function

within each line of business and Chief Investment Office (CIO). As part of the self-

assessment process, the Firm identified three general categories for review and

improvement:

Model Governance and Implementation,

Market Risk and Governance, and

Risk Independence.

Within each category, the Firm identified specific areas of focus. In Model Governance

and Implementation, the Firm focused on conducting a spot check of significant drivers

and broadening the model approval process to encompass implementation and ongoing

monitoring. Within the category of Market Risk and Governance, the areas of focus

were:

(1) The appropriateness of the limit structure relative to risks undertaken;

(2) The appropriateness of the risks undertaken;

(3) Policy, response, and escalation process concerning limit breaches; and

(4) Consideration within line of business risk committees of liquidity and

concentration in positioning.

Within the category of Risk Independence, the Firm reviewed its risk committee

structure.

The company has established departments and heads throughout its structure for the

maintenance of the business activities. They are focused towards ensuring the financial

health as well as proper control and coordination of the business operation.

2.2 Assessment of External Environment

Environment Strategy in external environment assessment the JPMorgan Chase & Co.

emphasizes the importance of integrating–or mainstreaming–environment into country

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development programs, sector strategies, and investments and underpinning sustainable

development. It introduced environmental policies and procedures as well as

community development and environment sustainability to integrate good

environmental management into the business operations, and has also developed

environmental assistance programs to help client countries integrate environmental

issues into their development process, to address their pressing environmental

challenges.

2.3 JPMorgan Chase & Co. SWOT Analysis

“SWOT is an acronym for the internal Strengths and Weaknesses of a firm and the

environmental Opportunities and Threats facing that firm. SWOT analysis is a widely

used technique through which managers create a quick overview of a company’s

strategic situation. The technique is based on the assumption that an effective strategy

derives from a sound “fit” between a firm’s internal resources (strengths and

weaknesses) and its external situation (opportunities and threats). A good fit maximizes

a firm’s strengths and opportunities and minimizes its weaknesses and threats.

Accurately applied, this simple assumption has powerful implications for the design of

a successful strategy.”

The assessment of internal as well as external environment can also be done through

the proper strategic SWOT analysis. Some leaders like Stev jobs has said that it is the

environment which decides the company’s key strength and weakness and the potential

opportunities and threats.

Strength

JPMorgan Chase & Co. is one of the most successful business service firms in the

United States. It is Business Company with $ 1.2 trillion in assets and about $ 106

billion is shareholders equity which shows its strength as a financial institution.

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JPMorgan Chase & Co. is one of the oldest service firms in the world and operates both

banking and non-banking subsidiaries.

With revenues of $ 56.9 billion in the US and 206000 employee pools, makes JPMorgan

Chase & Co. a leader in business services providing firm in the US. It is said to be the

top 3 largest banking institution in the United States.

JPMorgan Chase & Co. operates on the national as well as international level.

Therefore, its market share is not restricted to one region or country. The company

operates in over 60 countries worldwide and still able to meet the objectives and the

need of the clients effectively.

JPMorgan Chase & Co. has a superior reputation; their knowledge to attract and keep

its personnel and their attractiveness of their products to their customers adds to its

strength greatly.

JPMorgan Chase & Co. signed a $ 5 billion outsourcing agreement with IBM. It also

formed a merger with Bank One Corp. to encourage self-sufficiency and cost reduction

by employing a do-it-yourself approach.

Weakness

The IT infrastructure of JPMorgan Chase & Co. was not sufficient in maintaining their

systems in their business operations

The cancellation of outsourcing agreement with IBM resulted in transferring of

employees to IBM’s payroll, in employee anger and loss of productiveness of the

company.

New consultant had to be brought in the company to assist in implementing the

outsourcing strategy and in serving employees finished the transformation which

caused additional expenses incurred by the company.

There was seen a decrease in productiveness due to heavier workload for existing

employees. Employees lost their jobs on the restructuring back into JPMorgan Chase

& Co. The merger with the Bank One created 12000 layoffs.

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Furthermore, it can be added the JPMorgan Chase & Co. has overdependence on the

USA market. This tendency of the company has resulted in lack of expansion of

business and diversification.

Opportunities

The outsourcing agreement that the company undertakes from time to time could make

it more competent by resulting in cost reduction and increased quality. The agreement

with IBM and other lending companies would create a significant value for clients,

employees and shareholders.

The merger with Bank One led to the accomplishment of large retail banking presence.

Therefore, helps in increased capacity to manage large business infrastructure. The

expansion of its products and services could also create opportunities for the company

with the diversifying portfolios for consumers.

Threats

The company faces threats from number of competitors because of operation in over

6o countries, both globally and regionally. The fact that companies like IBM could

supply its services for numerous companies of the size of JPMorgan Chase & Co. and

hence, increase their competitiveness.

Employee having to do additional work, having salary reductions and re-application

process for their jobs could cause them to be de-motivated and retrograde productivity.

The possibility of newborn firms entering into the business affects competition, not

only a firm’s present rivals pose a threat to the business alone.

A danger of substitutes exists that the JPMorgan Chase customers might find less

expensive and hence, their products demand is affected by the price change of a

substitute products.

Apart from the business operating threats, the increased regulatory pressures on

interchange rates as well as consolidation in financial services industry also poses major

degree of threats to JPMorgan Chase & Co.

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Section III

Summary and Suggested Strategies

3.1 Summary

JP Morgan Chase & Company (JPMC) is a financial services company that provides

investment banking, security services, asset management, hedge fund and retail

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banking services through its subsidiaries. JPMorgan, the company's wholesale

business, is one of the world's leading investment banks. JPMorgan is a recognized

brand name in the financial services sector. It offers a full range of investment banking

products and services in all major capital markets, including advising on corporate

strategy and structure, capital raising in equity and debt markets, sophisticated risk

management, market-making in cash securities and derivative instruments, and

research.

JPMorgan maintains a leading position in the number of debt, equity and equity-related

transactions undertaken globally. JPMorgan’s strong investment banking operations,

are core to JPMC’s global operations, and give the company a platform to drive growth.

However, JPMC is threatened by a weak mortgage market that could have an adverse

impact on the company's earnings from the sector.

3.2 Suggested Strategies

JPMorgan Chase & Co. was built with hard work over 200 years. It should create a

company that all can be proud of, and integrate the overall financial markets to work

together to build the best financial services company in the world.

JPMorgan Chase & Co. is the destination of number of diversified customers who

greatly depend on its. Their success and intimate growth only comes from the success

of the firm.

With all those business strategies of JPMorgan Chase & Co., we, group ‘V’, would like

to suggest some of our views which we gained after the analytical study of JPMorgan

Chase & Co. They include:

� Continuous market research and consumer requirements forecasting for

sustainability and driving success from the global competition

� Proactive in decision making and succession planning to ensure flexibility in

the business operation and continuity of its operation by removing

uncertainties in the middle of the operations.

� Adopting unquestionable HRM practices with dynamic aspects.

� Diversification of the portfolio through global expansion of the products and

services.

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� Limit the over dependence in U.S market and reaching to the needed market

place around the world.

References

Web Sites

http://www.jpmorganchase.com/corporate/Home/home.htm

http://www.jpmorganchase.com/corporate/Home/newsroom.htm

http://web.worldbank.org/wbsite/external/topics/environment

http://en.wikipedia.org/wiki/jpmorgan_chase

Newspapers

http://topics.nytimes.com/top/news/business/companies/morgan_j_p_chase_and_compan

y/index.html

http://finance.yahoo.com/q/h?s=jpm

Reports

JPMorgan Chase & Co. Annual Report 2011 and 2012